COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
Mr Justice Cresswell
London, WC2A 2LL
B e f o r e :
LORD JUSTICE KAY
LORD JUSTICE RIX
| BHP BILLITON PETROLEUM LTD & OTHERS||Claimants/|
|- and -|
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Mr Christopher Hancock QC & Mr Philip Edey (instructed by Messrs Linklaters) for the Appellant
AS APPROVED BY THE COURT
Crown Copyright ©
Lord Justice Rix :
This is the judgment of the court.
"Did the incorporation of non-compliant pipe cause the pipeline to fail (as the claimants say) or would it have failed anyway (as the defendant says)?"
"Was the Claimants' loss caused by their reliance on the Defendant's fraudulent misrepresentations? Did the pipeline fail for the reasons pleaded in paragraph 25 of the Re-Re-Amended Points of Claim?"
Burden of proof
"For the reasons set out above I find that on the balance of probabilities the incorporation of non-compliant pipe caused the pipeline to fail. For the reasons set out above I find on the balance of probabilities that the pipeline would not have failed anyway."
"The burden of proof in any particular case depends on the circumstances in which the claim arises. In general the rule which applies is "Ei qui affirmat non ei qui negat incumbit probatio". It is an ancient rule founded on considerations of good sense and it should not be departed from without strong reasons."
"This rule is adopted principally because it is just that he who invokes the aid of the rule of law should be the first to prove his case; and partly because, in the nature of things, a negative is more difficult to establish than an affirmative. The burden of proof is fixed at the beginning of the trial by the state of the pleadings, and it is settled as a question of law, remaining unchanged throughout the trial exactly where the pleadings place it, and never shifting."
"As a result of further investigation, six leak sites were identified at which the pipeline had failed due to SSCC…As for the cause of the failure of the pipeline at these particular sites:
(1) SSCC initiation in the weld roots is now known to have been caused by a combination of excessive hardness of parts of the weld produced by the welding procedure applied by McDermott and the use of the Pipeline for Sour Service.
(2) The Pipeline failed where one or more of the Incorporated Pipes either side of the weld had a CEV in excess of the specified maximum of 0.40% because the relatively low resistance to crack propagation of the material from which those Pipes were made allowed the cracks to extend through the thickness of the Pipes."
"The incorporation of the non-compliant Pipes caused the Pipeline to fail. The Claimants will rely on the facts that:
(i) as shown in Schedule 3, at each of the six welds where a leak occurred, at least one of the Pipes either side of the weld came from one of the heats…and as such did not comply with the Specification and/or the Data Sheet in that it had a CEV in excess of 0.40%; and
(ii) the higher the CEV of any particular Pipe, the less resistant it is to the propagation of cracks initiated by SSCC."
"11.1 It is admitted that the pipes cracked.
11.2 The cause of these cracks was sulphide stress corrosion cracking.
11.3 The cracks initiated in the weld root, and then propagated through the weld metal, the heat affected zone ("HAZ") and the parent metal.
11.4 As regards the crack initiation:-
11.4.1 The welding procedure adopted for the pipeline caused the weld metal at the weld root to develop excessive hardness.
11.4.2 This excessive hardness in the weld root was not caused by excessive hardness in the parent metal.
11.4.3 Under the extremely sour conditions to which the pipeline was exposed, the excessive hardness in the weld root caused hydrogen cracks to initiate. Cracks initiated both in welds which joined pipes which complied with the CE specification and in welds which joined pipes which did not comply.
11.5 As regards the crack propagation, the cracks would have propagated irrespective of whether the parent pipes were within the CE specification."
"13A.8…Dalmine will say that, if no false representations had been made, the Claimants would still have suffered the loss pleaded, because:
13A.8.1 Compliant pipe would have been required and delivered.
13A.8.2 The same weld procedure would have produced excessive hardness in the weld root metal.
13A.8.3 The same weld procedure would have been followed as was in fact followed.
13A.8.4 Cracks would have initiated in the weld root.
13A.8.5 The stress intensity applied by the cracks so initiated would have been above the resistance to crack propagation of compliant pipes.
13A.8.6 Cracks would have propagated in such compliant pipes, leading to leakage"
14.1 It is admitted that the Claimants have replaced the pipeline and that they were prompted to do so by the cracking in the pipeline. It is denied that the cause of the cracking was as alleged by the Claimants. Dalmine's case as to causation is set out in paragraph 13A.8 above. In the premises and by reason of the facts and matters set out in paragraph 14.1B below, it is averred that the pipeline would have been required to be replaced irrespective of anything done or not done by Dalmine." [emphasis added]
The issues at trial
"I. The resistance of Compliant Pipes within the Failure Zone to Crack Propagation
60. Issue 1. How resistant to crack propagation would compliant pipes have been within the Failure Zone?
61. Sub-Issue 1.1: What was the upper limit of the CEV of "compliant pipes" according to the Specification and Data Sheet?
62. Sub-Issue 1.2: What was the actual CEV of each of the pipes within the Failure Zone?
63. Sub-Issue 1.3: Which heats fall to be excluded from consideration in the light of the parties' agreement of 17 January 2002?
64. Sub-Issue 1.4: What, if any, figure should the Court take as being the CEV of pipes which Dalmine would have supplied (instead of those pipes which it would not have supplied had it not been fraudulent) or which fall to be excluded as a result of the agreement of 17 January 2002?
65. Sub-Issue 1.5: On the assumption that only compliant pipes had been incorporated into the pipeline, what was the resistance to propagation of compliant pipe within the Failure Zone?
II. Cracks in Welds in the Failure Zone
66. Issue 2: What range (as regards depth) of cracks was present, or was likely to appear, in welds between compliant pipes within the Failure Zone and what was their likely propensity to propagate?
67. Sub-Issue 2.1: What size cracks had initiated and/or propagated pre-failure and what was their distribution between the welds?
68. Sub-Issue 2.2: What scope was there for the further initiation and/or propagation of cracks had the pipeline not been de-pressurised, given further time and/or changes in environmental conditions?
69. Sub-issue 2.3: What was the stress intensity factor likely to have been at the tip of the crack of the size which Dalmine contends would be sufficiently large to cause failure of compliant pipes?
III. Approach to Probability
70. Issue 3: Can the Court assess the probability of the combination of factors required to produce the situation in which a crack would develop in a weld between compliant pipes within the Failure Zone, which would be sufficiently large to overcome the resistance offered by (compliant) pipe either side of the weld, to the propagation of that crack through the thickness of the pipe material? If so, how should it go about doing so?"
"The first step in establishing causation is to eliminate irrelevant causes, and this is the purpose of the "but for" test. The courts are concerned, not to identify all of the possible causes of a particular incident, but with the effective cause of the resulting damage in order to assign responsibility for that damage. The "but for" test asks: would the damage of which the claimant complains have occurred "but for" the negligence (or other wrongdoing). Or to put it more accurately, can the claimant adduce evidence to show that it is more likely than not, more than 50 per cent probable, that "but for" the defendant's wrongdoing the relevant damage would not have occurred. In other words, if the damage would have occurred in any event the defendant's conduct is not a "but for" cause."
"It is worth bearing in mind that the "but for" test functions as an exclusionary test, i.e. its purpose is to exclude from consideration irrelevant causes."
"On the assessment it will be open to the defendant to argue (and prove so far as he may be able to do so) that (i) it is more likely than not that the claimant would have undergone an operation with the same or similar risks in the future; and (ii) it is more likely than not that the same risk would have eventuated" (at para 43).